The Owners and/or Demise Charterers of the Dredger “Kamal XXVI” and the Barge “Kamal XXIV” v The Owners of the Ship “Ariela”
| Jurisdiction | England & Wales |
| Judge | Mr Justice Burton |
| Judgment Date | 14 October 2010 |
| Neutral Citation | [2010] EWHC 2531 (Comm) |
| Docket Number | Cases No: 2006 Folio 375 and 2009 Folio 669 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 14 October 2010 |
[2010] EWHC 2531 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Before: Mr Justice Burton
Cases No: 2006 Folio 375 and 2009 Folio 669
Mr Timothy Hill Qc And Mr Jeremy Lightfoot (Instructed By Russell Ridley & Co) For Ariela
Mr Peter Macdonald Eggers (Instructed By Barlow Lyde & Gilbert Llp) For The Underwriters
Hearing date: 4 October 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Burton:
The Owners of the ship Ariela (“Ariela”) incurred costs of more than $1.25m (exclusive of interest) in defending a claim by an entity known as Kamal (the Owners and/or Demise Charterers of the dredger “Kamal XXVI” and the barge “Kamal XXIV”). There were two actions (now consolidated) between Ariela and Kamal in which I gave judgments ( [2009] EWHC 177 (Comm) and [2009] EWHC 3256 (Comm)). I concluded that Kamal's claim was a fraudulent claim from the outset, and resulted from fraudulent statements by Kamal as to the extent of the claim and the loss, and fraudulent concealment by Kamal of the true nature of the claim (paragraphs 21, 22 and 30 of the latter judgment). Despite orders by this Court, including interim payment orders, Kamal has failed to pay any sum to Ariela, nor complied with my order to repay to Ariela £65,000 paid on account of costs to Kamal by Ariela on 14 November 2007.
The Respondents to this application are the Underwriters, on the basis that they supported and funded Kamal's action and instructed the solicitors who acted in the first action (Ince & Co) in pursuing recovery against Ariela both of the insured claim, which the Underwriters paid out to Kamal in the sum of US$631,422.97 in 2005–2006, and to which they were subrogated, and in respect of Kamal's uninsured losses. Ariela seek an order, pursuant to s51(3) of Senior Courts Act 1981, that the Underwriters pay the costs incurred by them (and not recovered from Kamal as above) in the two sets of proceedings. Such application has been referred to me as the trial judge, pursuant to the practice established in Symphony Group plc v Hodgson [1994] QB 179 at 193. It is common ground that the discretionary jurisdiction to make such an order, first articulated by the courts in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, is only exercised if it is just and equitable to do so.
The instant application by Ariela is for disclosure by the Underwriters, as Respondents, of documents or categories of documents set out in a Schedule to an Application Notice dated 25 September 2010. In the event, there has been a degree of agreement in respect of the contents of that Schedule: as to Category 1 (documents referred to in the Underwriters' Defence), items 1 – 6 are agreed, as is the generic item 8, insofar as it relates to items 1 – 6: in Category 2 (documents pre-dating the Underwriters' instruction of Ince & Co (i.e. before 26 January 2006)), items 9(i) and (l) are agreed: in Category 3 (documents post-dating the Underwriters' instruction of Ince & Co (i.e. after 26 January 2006)), items 12 – 14 are not opposed, insofar as there are any documents concerning the Underwriters' agreement to retain Ince & Co, and the basis upon which they would pay Ince & Co's fees: and in respect of Category 4 (payment), item 20(a) is no longer in issue, and with regard to the balance of items 20 and 21, the only issue relates to the Underwriters' claim of privilege, such that there is agreement by them to disclose documents falling within those items, but suitably redacted, in particular to remove any narratives on invoices or receipts.
It was common ground that there is a place for the making of interlocutory orders, such as orders for disclosure of documents, in relation to a s51 application. Both parties referred to the helpful approach of Laddie J in Robertson Research International Ltd v ABG Exploration BV and others (13 October 1999 QBD) as endorsed by Morgan J in PR Records Ltd v Vinyl 2000 Ltd and others [2007] EWHC 1721 (Ch) [2008] 1 Costs LR 19, and of Blake J in Thomson v Berkhamsted Collegiate School and others [2009] EWHC 2374 (QB) [2009] 6 Costs LR 859. Laddie J, in Robertson, distinguished (at paragraphs 36, 37 and 41) the earlier decision of Lightman J in Bristol & West plc v Bhadresa [1999] 1 Lloyd's Rep IR 138 by reference to Lightman J's conclusion that there was not in Bristol & West a sufficiently good arguable case to allow the s51 claim to proceed at all. With regard to proceedings in which, as in this case, the application is to proceed to resolution at a trial, Laddie J concluded, in paragraph 40, that what was required is “that the court should exercise its considerable administrative powers to ensure that the application should be dealt with as speedily and inexpensively as possible, consistent with fairness to both sides”. Blake J, in Thomson, at paragraphs 14 to 16 of his judgment, where he referred (at paragraph 15), to Morgan J's judgment in PR Records and to a judgment of mine in Greco Air Inc v John Tillingand others [2009] EWHC 115 (QB) concluded that “it is… plain from those cases that the court has power to exercise disclosure orders in order to facilitate in an economical fashion a fair hearing of the application, although disclosure is often made without formal order”, and continues (in paragraph 16) “If the court decides that it is necessary and in the interests of justice to make a disclosure order, it may proceed to give a detailed order within its general powers under the CPR to remove outstanding issues that may be the source of delay and further expense if unaddressed. Such an order may include inspection of documents by the court where there is a clear issue as to whether privilege attaches to them”.
At the invitation of both sides, I have borne in mind on this application for disclosure that the s51 application should be dealt with “as speedily and as inexpensively as possible, consistent with fairness to both sides”. I have also considered the issues which are live in this application and to which of course alone disclosure should relate. I am satisfied that, if disclosure is relevant to such issues, and is not protected by privilege, it is in this case appropriate to make such order. I have not been satisfied by Mr Peter MacDonald Eggers, who has argued the matter persuasively on behalf of the Underwriters, that an order for disclosure as sought would, in this case, be disproportionate or would be otherwise than necessary and just. The claim by Ariela, resisted by the Underwriters, is for upwards of $1.25m plus interest. There is therefore a considerable sum at stake. The Underwriters' evidence is that there are some 45 lever arch files for them to consider, and that the costs of the s51 application will be considerably increased if consideration of those files, and the making of disclosure pursuant to such consideration, is necessary. Given that some disclosure is conceded, but, more significantly, that, as will be seen, I am satisfied that, even apart from the contentious issues on this application, there would have been the need for some further disclosure in any event, and that it is required that, in the interests of justice, the issues in contest between Ariela and the Underwriters must be properly considered by the court, I am persuaded that this is a s51 application in which there ought to be an order for disclosure.
The Issues
As I have said above, before I can consider the contested disclosure, it is necessary for me to decide what the issues are and will be on this application. Mr MacDonald Eggers points to what was stated by Phillips LJ in Chapman Ltd v Christopher and another [1998] 1 WLR 13 at 20F, which I recite subject to my (underlined) amendment to his feature (4), rendered necessary by the subsequent consideration by the Court of Appeal in Cormack v Excess Insurance Co Ltd [2002] Lloyd's Rep IR 398at 405 per Auld LJ and Palmer v The Estate of Kevin Palmer deceased and others [2008] EWCA Civ 46, per Rimer LJ at paragraphs 25 to 26 Phillips LJ was reciting the “features relied upon by the plaintiffs”, but it is plain from the decision in Chapman, and from the subsequent judgment of Thomas J in Citibank NA v Excess Insurance Co Ltd [1999] 1 Lloyd's Rep IR 122, as well as from Cormack and Palmer, that they are (non-exclusive) requirements for success on a s51 application:
“The features … to justify seeking a costs order against the insurers include the following: (1) the insurers determined that the claim would be fought; (2) the insurers funded the defence of the claims; (3) the insurers had the conduct of the litigation; (4) the insurers fought the claim exclusively alternatively predominantly to defend their own interests; (5) the defence failed in its entirety.”
I shall call them the five ‘ Chapmanfeatures’.
In this s51 application, Ariela will be asserting that they have satisfied such features, save insofar as it will be necessary for Ariela to make a minimal adjustment to the effect of feature (5) where, as here, the claim for US$1,296,583, in respect of both dredger and barge, led to recovery of only $6245 (all in respect of the dredger), with an indemnity costs order against Kamal.
I consider first Chapmanfeatures (1), (3) and (4), which...
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